You can remortgage at any time but it is not worth doing just to switch lender.
There are certain times which could be more advantageous when it comes to remortgaging such as the following:
- Low interest rates
- At the end of your current term
- When you have built up a certain amount of equity in your property
- When remortgaging and the costs of doing so still work out less expensive than your current mortgage
Low interest rates
Mortgage lenders are always providing new deals and mortgage rates. If you have had your mortgage for a long period of time, it is likely that there is a cheaper deal elsewhere. However, it may be the case that your existing lender can also offer you a new term.
You may be able to fix a lower interest rate for a period of time that suits you e.g. a 2 year fixed rate term. Your repayments will remain the same regardless of what happens to other rates in the market however, there is always the risk that rates could decrease, meaning you’d be paying more than you would have, on a standard variable rate for example. It is also worth noting that whilst fixing your mortgage’s interest rate, you may incur an Early Repayment Charge which is payable should you decide to remortgaging before the fixed period ends.
At the end of your current mortgage term
After your current term expires e.g. after a fixed rate period, you will start to pay the lender’s standard variable interest rate which is mostly likely higher. If you do not want to stay on this rate you will need to remortgage.
The difference in your product rate and the standard variable rate depends on what is happening to rates as a whole at that certain time. It is recommended that you search the whole of the market to see what new rates are available to you.
Remortgaging before the end of your current product e.g. during a fixed rate period, may incur an Early Repayment Charge (ERC). We can advise whether this is worth paying or whether it is best to wait until the mortgage term expires.
When you have built up a certain amount of equity in your property
Equity is the amount of your home that you own outright ie. the amount that isn’t mortgaged. The proportion of equity to the amount mortgage is called Loan to Value ratio.
The lower the loan to value ratio – the more equity you own, the better the remortgage deals available to you will be.
When remortgaging and the costs of doing so still work out less expensive than your current mortgage
When changing mortgage lender, you will nearly always have to pay charges of some sort whether it be an arrangement fee; an early repayment charge or exit fee; a valuation fee or legal fees.
It is worth calculating whether you are saving money overall by remortgaging taking into consideration these costs.